STOCK-BASED COMPENSATION

6 Months Ended

Jun. 29, 2013

STOCK-BASED COMPENSATION

STOCK-BASED COMPENSATION

2. STOCK-BASED COMPENSATION

Stock-based compensation expense for all stock-based awards programs, including grants of stock options, is recorded in accordance with “Compensation-Stock Compensation”, Topic 718 of the Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”). During the 26- and 13-week periods ended June 29, 2013, the Company recognized approximately $214,000 and $77,000, respectively, in stock-based compensation expense, and for the same periods ended June 30, 2012, the Company recognized approximately $162,000 and $81,000, respectively.  The grant date fair value for stock options is calculated using the Black-Scholes option valuation model.

On February 5, 2013, the Company granted Jay Margolis (its new Chief Executive Officer and Chairman of the Board) time-based stock options to purchase 1,000,000 shares of the Company’s common stock at an exercise price of $3.34 which had a weighted average grant date fair value of $1.15.  These options vest in equal installments on the first, second and third anniversary of the grant date. The Company granted no stock options during the 26- and 13-week periods ended June 30, 2012. No excess tax benefits were recognized from the exercise of stock options during the 26- week periods ended June 29, 2013 and June 30, 2012.

The following assumptions were used during the 26-week period ended June 29, 2013:

Expected dividend rate	$	0.00
Expected volatility	50.72		%
Risk free interest rate	0.41		%
Expected lives (years)	3.00

During the first quarter of fiscal 2013, 40,000 shares of the Company’s common stock were issued for services to its board members. The total fair value of the issued common stock was approximately $94,000, of which approximately $71,000 and $12,000 were included in stock-based compensation expense for the 26- and 13-week periods ended June 29, 2013, respectively. The remaining cost is expected to be recognized over the remainder of fiscal 2013. Comparatively, during the first quarter of fiscal 2012, 14,000 shares of the Company’s common stock were issued for services to its board members. The total fair value of the issued common stock was approximately $95,000, of which approximately $48,000 and $24,000 were included in stock-based compensation expense for the 26 and 13-week periods ended June 30, 2012, respectively.

During the 26- and 13-week periods ended June 29, 2013, the Company granted restricted stock awards representing 255,000 shares of the Company’s common stock, which had a weighted-average grant date fair value of $3.81 per share. A portion of these restricted stock awards will contingently vest over a three-year period, based on the Company meeting performance goals, and a portion will vest over the requisite service period.  Comparatively, during the 26- and 13-week period ended June 30, 2012, the Company granted restricted stock awards representing 12,000 shares of the Company’s common stock, which had a weighted-average grant date fair value of $6.70 per share. These restricted shares will contingently vest over a three-year period based on the Company meeting performance goals.